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Federal Court of Australia |
Last Updated: 26 February 2010
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Letten [2010] FCA 140
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Citation:
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Australian Securities and Investments Commission v Letten [2010] FCA
140
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Parties:
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AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION v MARK RONALD LETTEN, LGH HOLDINGS LIMITED
(ACN 007 191 943),
211 WELLINGTON ROAD PTY LTD
(ACN 092 663 860), BLUEMIST HOLDINGS PTY LTD
(ACN 097 306 922), DELLWOOD
HOLDINGS PTY LTD
(ACN 098 505 803), ENOMORE ENTERPRISES PTY LTD
(ACN 082 158 487), FIRBANK ARCH PTY
LTD
(ACN 059 464 381), GLENLINE PTY LTD
(ACN 098 532 364), GERLING HOLDINGS PTY LTD
(ACN 091 726 457),
LGH ADMINISTRATION PTY LTD
(ACN 007 165 069), LGH FINANCE PTY LTD
(ACN 078 859 248), LOW HEAD
VILLAGE PTY LTD
(ACN 091 731 958), NICHOLSON STREET PTY LTD
(ACN 069 104 089), HOLLOWAY CREST PTY LTD
(ACN 091 731 967), ROSEBERY ENTERPRISES PTY LTD
(ACN 091 826 229), SIMMS INVESTMENTS PTY LTD
(ACN 093 504 511),
SY21 RETAIL PTY LTD
(ACN 107 874 564), THE GLEN CENTRE HAWTHORN PTY LTD
(ACN 089 906 543), CASTELLO
HOLDINGS PTY LTD
(ACN 088 204 175), TWINVIEW NOMINEES PTY LTD
(ACN 097 307 278), YARRA VALLEY GOLF
PTY LTD
(ACN 066 632 479), ADINA RISE PTY LTD
(ACN 083 181 122), ALBRIGHT INVESTMENTS PTY LTD
(ACN 088 204 166),
ASHFIELD RISE PTY LTD
(ACN 093 504 806), BRADFIELD CORPORATION PTY LTD
(ACN 088 204 371), COPELAND
ENTERPRISES PTY LTD
(ACN 093 504 824), DEVLIN WAY PTY LTD
(ACN 088 264 813), FIRST HAZELWOOD PTY LTD
(ACN 093 505 303), GLENBELLE PTY LTD
(ACN 097 306 646), GLENVALE WAY PTY LTD
(ACN 088 287 021),
GREENVIEW LANE PTY LTD
(ACN 093 505 312), HALLMARK CORPORATION PTY LTD
(ACN 093 505 312), MOORLEIGH
HOLDINGS PTY LTD
(ACN 088 287 058), NORTON RIDGE PTY LTD
(ACN 078 821 066), RALEIGH GLEN PTY LTD
(ACN 088 204 380),
REDCREST HOLDINGS PTY LTD
(ACN 100 836 486), SURI CORPORATION PTY LTD
(ACN 093 505 321), SUTTON RISE
PTY LTD
(ACN 088 204 399), THE VIRTUAL MLMER PTY LTD
(ACN 065 374 665), TIVENDALE PTY LTD
(ACN 093 505 349),
TULLOCH DOWNES PTY LTD
(ACN 078 895 048), MAINKING PTY LTD
(ACN 100 790 485), TOPGLEN PTY LTD
(ACN 096 857 564),
ALLBLUE PTY LTD
(ACN 100 836 388) and ARANBAY PTY LTD
(ACN 098 532 319)
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File number(s):
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VID 95 of 2010
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Judge:
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GORDON J
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Date of judgment:
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Date of last submissions:
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25 February 2010
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Place:
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Melbourne
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Division:
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GENERAL DIVISION
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Number of paragraphs:
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50
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Solicitor for the Plaintiff:
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Australian Securities and Investments Commission
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Counsel for the First, Second and Tenth Defendants:
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Mr M Sifris SC and Mr SJ Hibble
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Solicitor for the First, Second and Tenth Defendants:
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Baker & McKenzie
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Submitting appearances were filed on behalf of the Third – Ninth,
Eleventh – Sixteenth and Eighteenth – Forty Fifth
Defendants
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Counsel for Mr Peter Rhys Bate, a director and 50% shareholder in the
Seventeenth Defendant:
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Mr E Woodward
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Solicitor for Mr Peter Rhys Bate, a director and 50% shareholder in the
Seventeenth Defendant:
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Mills Oakley
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AND:
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LGH HOLDINGS LIMITED (ACN 007 191 943)
Second Defendant 211 WELLINGTON ROAD PTY LTD
(ACN 092 663 860)
Third Defendant BLUEMIST HOLDINGS PTY LTD
(ACN 097 306 922)
Fourth Defendant DELLWOOD HOLDINGS PTY LTD
(ACN 098 505 803)
Fifth Defendant ENOMORE ENTERPRISES PTY LTD
(ACN 082 158 487)
Sixth Defendant FIRBANK ARCH PTY LTD (ACN 059 464 381)
Seventh Defendant GLENLINE PTY LTD (ACN 098 532 364)
Eighth Defendant GERLING HOLDINGS PTY LTD
(ACN 091 726 457)
Ninth Defendant LGH ADMINISTRATION PTY LTD
(ACN 007 165 069)
Tenth Defendant LGH FINANCE PTY LTD (ACN 078 859 248)
Eleventh Defendant LOW HEAD VILLAGE PTY LTD
(ACN 091 731 958)
Twelfth Defendant NICHOLSON STREET PTY LTD
(ACN 069 104 089)
Thirteenth Defendant HOLLOWAY CREST PTY LTD
(ACN 091 731 967)
Fourteenth Defendant ROSEBERY ENTERPRISES PTY LTD
(ACN 091 826 229)
Fifteenth Defendant SIMMS INVESTMENTS PTY LTD
(ACN 093 504 511)
Sixteenth Defendant SY21 RETAIL PTY LTD
(ACN 107 874 564)
Seventeenth Defendant THE GLEN CENTRE HAWTHORN PTY LTD
(ACN 089 906 543)
Eighteenth Defendant CASTELLO HOLDINGS PTY LTD
(ACN 088 204 175)
Nineteenth Defendant TWINVIEW NOMINEES PTY LTD
(ACN 097 307 278)
Twentieth Defendant YARRA VALLEY GOLF PTY LTD
(ACN 066 632 479)
Twenty-First Defendant ADINA RISE PTY LTD
(ACN 083 181 122)
Twenty-Second Defendant ALBRIGHT INVESTMENTS PTY LTD
(ACN 088 204 166)
Twenty-Third Defendant ASHFIELD RISE PTY LTD
(ACN 093 504 806)
Twenty-Fourth Defendant BRADFIELD CORPORATION PTY LTD
(ACN 088 204 371)
Twenty-Fifth Defendant COPELAND ENTERPRISES PTY LTD
(ACN 093 504 824)
Twenty-Sixth Defendant DEVLIN WAY PTY LTD
(ACN 088 264 813)
Twenty-Seventh Defendant FIRST HAZELWOOD PTY LTD
(ACN 093 505 303)
Twenty-Eighth Defendant GLENBELLE PTY LTD
(ACN 097 306 646)
Twenty-Ninth Defendant GLENVALE WAY PTY LTD
(ACN 088 287 021)
Thirtieth Defendant GREENVIEW LANE PTY LTD
(ACN 093 505 312)
Thirty-First Defendant HALLMARK CORPORATION PTY LTD
(ACN 093 505 312)
Thirty -Second Defendant MOORLEIGH HOLDINGS PTY LTD
(ACN 088 287 058)
Thirty-Third Defendant NORTON RIDGE PTY LTD
(ACN 078 821 066)
Thirty-Fourth Defendant RALEIGH GLEN PTY LTD
(ACN 088 204 380)
Thirty-Fifth Defendant REDCREST HOLDINGS PTY LTD
(ACN 100 836 486)
Thirty-Sixth Defendant SURI CORPORATION PTY LTD
(ACN 093 505 321)
Thirty-Seventh Defendant SUTTON RISE PTY LTD
(ACN 088 204 399)
Thirty-Eighth Defendant THE VIRTUAL MLMER PTY LTD
(ACN 065 374 665)
Thirty-Ninth Defendant TIVENDALE PTY LTD (ACN 093 505 349)
Fortieth Defendant TULLOCH DOWNES PTY LTD
(ACN 078 895 048)
Forty-First Defendant MAINKING PTY LTD (ACN 100 790 485)
Forty-Second Defendant TOPGLEN PTY LTD (ACN 096 857 564)
Forty-Third Defendant ALLBLUE PTY LTD (ACN 100 836 388)
Forty-Fourth Defendant ARANBAY PTY LTD (ACN 098 532 319)
Forty-Fifth Defendant |
UPON THE UNDERTAKINGS OF THE FIRST DEFENDANT SET OUT IN ANNEXURE C TO THIS ORDER:
AND UPON THE UNDERTAKINGS OF PETER RHYS BATE, A DIRECTOR AND SHAREHOLDER IN THE SEVENTEENTH DEFENDANT, SET OUT IN ANNEXURE D TO THIS ORDER.
THE COURT DECLARES THAT:
THE COURT ORDERS THAT:
(a) identify, collect, and secure the Property;
(b) identify, and secure the Property in the possession, custody or control of each of the Corporate Defendants;
(c) protect the Property in the interests of persons to whom the Corporate Defendants are liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for securities, or other Property;
(d) ascertain the amount of the funds received, or paid out, by each of the Corporate Defendants in consequence of promoting, offering and/or operating the Schemes;
(e) identify any dealings with, payments of, or distributions by or uses made of the funds referred to in (d) of this paragraph by each of the Corporate Defendants;
(f) identify any Property purchased or acquired with the funds referred to in (d) of this paragraph;
(g) recover funds referred to in (d) of this paragraph;
(h) provide reports to the Court as referred to in paragraph 11 of these orders;
(i) commence the orderly winding up of the Schemes ordered to be wound up pursuant to paragraph 4 of these orders.
(a) all powers necessary to identify, and secure the Property of each of the Schemes;
(b) all powers necessary to collect the funds referred to in paragraph 5(d) of these Orders;
(c) without limiting sub-paragraph (a) and (b), the powers set out in ss 420(1) and (2) of the Act, provided that the Receivers may not exercise the power to dispose of any Property of the Schemes;
(d) the power to apply to the Court for directions or further orders, including orders varying the terms of these Orders.
(a) debts as between the Schemes; and
(b) distributions to Investors (as defined in Annexure A of these Orders) in the Schemes.
(a) the Receivers shall assume the management of the Corporate Defendants and shall perform the duties, and may perform any of the functions and exercise any of the powers, of the directors of the Corporate Defendants;
(b) the provisions of the Act relating to the keeping of accounts, the appointment and re-appointment of auditors and the rights and duties of auditors shall continue to apply in relation to the Corporate Defendants, and in the application of those provisions to and in relation to the Corporate Defendants a reference to the directors of any one of the Corporate Defendants shall be read as a reference to the Receivers as receivers and managers of that company; and
(c) there shall be no stay of any action or other civil proceedings by or against any of the Corporate Defendants in any court or other tribunal nor shall there be any restraint upon the commencement or prosecution of any action or other civil proceedings by or against any of the Corporate Defendants in any court or other tribunal. In all or any of such actions or civil proceedings or otherwise the Receivers shall have authority to bring or defend such actions or civil proceedings in the name of any of the Corporate Defendants.
(a) the nature and identity of the Property of the Scheme;
(b) the claims (actual, contingent and other) of third parties in relation to the Property of the Scheme including, but not limited to, whether the Property of the Scheme has been given as security for any debt or liability and if so, the nature of the security and the debt or liability so secured;
(c) in relation to the Investors:
(i) the identities of the Investors and the nature and extent of their interests;
(ii) any payments made to or by Investors in relation to the Scheme;
(iii) any money owing to the Investors;
(d) the nature and identity of the liabilities of the Scheme including, but not limited to, liabilities to the Investors;
(e) the solvency of the Scheme;
(f) the most appropriate manner and timing of managing and realising any assets or Property of the Scheme so as to most benefit the Investors; and
(g) a recommendation as to the process for recovering all money owing to the Scheme, whether by way of loan or otherwise.
(a) make available to, and allow inspection by, the Receivers during business hours of any books (as defined in s 9 of the Act), records and other papers relating to the Schemes not delivered to ASIC including, but not limited to, all books (as defined in s 9 of the Act), records and other papers relating to the Schemes in the possession of any one of the defendants (saving all just exceptions); and
(b) allow the Receivers to copy any such books, records or other papers.
(a) The Scheme name;
(b) The Scheme property;
(c) The names and addresses of the corporate managers of the Scheme; and
(d) The names and addresses of all current and past investors in the Scheme.
(a) in the case of the Land Titles Office, by delivering a copy of these Orders to a person apparently in its employ at its premises, in Bourke Street, Melbourne;
(b) in the case of any bank, building society or other financial institution by delivering a copy of these Orders to a person apparently in the employ of that bank, building society or other financial institution; and
(c) in the case of any person or entity, by delivering a copy of these Orders to a person apparently in the employ of that person or entity.
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
The text of entered orders can be
located using Federal Law Search on the Court’s website.
ANNEXURE A
“Investor” means a person or entity who has, directly or indirectly, contributed moneys in respect of a Scheme.
“Property” means all real or personal property, assets or interests in property of any kind, within or outside Australia including, by virtue of s 1323(2A) of the Act, any property held otherwise then as a sole beneficial owner.
“Scheme” means the schemes listed in the following table:
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Scheme
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Description of property
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Joint venture manager/s
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1.
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211 Wellington Road Joint Venture
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211 Wellington Road, Mulgrave, Victoria
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211 Wellington Road Pty Ltd – Third Defendant
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2.
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Healesville Walk Shopping Centre Joint Venture
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251-263 Maroondah Highway, Healesville, Victoria
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Bluemist Holdings Pty Ltd – Fourth Defendant
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Howleys Road Joint Venture
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40-48 Howleys Road, Notting Hill, Victoria
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Dellwood Holdings Pty Ltd – Fifth Defendant
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4.
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George Street Joint Venture
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34 George Street, Launceston, Tasmania
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Enmore Enterprises Pty Ltd – Sixth Defendant
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5.
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Cimitiere House Joint Venture
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113 Cimitiere Street, Launceston, Tasmania
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Enmore Enterprises Pty Ltd – Sixth Defendant
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6.
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Reef House Resort
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99 Williams Esplanade Palm Cove, Qld – The Sebel Reef House
Resort
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Firbank Arch Pty Ltd – Seventh Defendant
Glenline Pty Ltd – Eighth Defendants |
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7.
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Queen Street Joint Venture
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118 Queen Street, Melbourne, Victoria
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Gerling Holdings Pty Ltd – Ninth Defendant
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8.
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Low Head Joint Venture
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136 Low Head Road George Town, Tasmania, 142 Low Head Road, George Town,
Tasmania & 40 Gunn Parade, George Town, Tasmania
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Low Head Village Pty Ltd – Twelfth Defendant
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9.
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Nicholson Street Joint Venture
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127-137 Nicholson Street, East Brunswick, Victoria
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Nicholson Street Pty Ltd – Thirteenth Defendant
Holloway Crest Pty Ltd – Fourteenth Defendant Rosebery Enterprises Pty Ltd – Fifteenth Defendant |
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10.
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National Boulevard Joint Venture
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144 National Boulevard, Campbellfield, Victoria
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Rosebery Enterprises Pty Ltd – Fifteenth Defendant
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11.
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Simms Investment Project
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626 Pittwater Road, Brookvale, NSW
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Simms Investments Pty Ltd – Sixteenth Defendant
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12.
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THIS ROW HAS BEEN LEFT BLANK INTENTIONALLY
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13.
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The Glen Centre Joint Venture
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673–681 Glenferrie Road, Hawthorn, Victoria
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The Glen Centre Hawthorn Pty Ltd – Eighteenth Defendant Castello
Holdings Pty Ltd – Nineteenth Defendant
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14.
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Twinview Joint Venture
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167 Flinders Lane, Melbourne, Victoria
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Twinview Nominees – Twentieth Defendant
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15.
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Yarra Valley Golf Joint Venture
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St John of God's Seminary and Henley Farm, Chirnside Park, Victoria
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Yarra Valley Golf Pty Ltd – Twenty-First Defendant
Adina Rise Pty Ltd – Twenty-Second Defendant Albright Investments Pty Ltd – Twenty-Third Defendant Ashfield Rise Pty Ltd – Twenty-Fourth Defendant Bradfield Corporation Pty Ltd – Twenty-Fifth Defendant Copeland Enterprises Pty Ltd – Twenty-Sixth Defendant Devlin Way Pty Ltd – Twenty-Seventh Defendant First Hazelwood Pty Ltd – Twenty-Eighth Defendant Glenbelle Pty Ltd – Twenty-Ninth Defendant Glenvale Way Pty Ltd – Thirtieth Defendant Greenview Lane Pty Ltd – Thirty-First Defendant Hallmark Corporation Pty Ltd – Thirty-Second Defendant Moorleigh Holdings Pty Ltd – Thirty-Third Defendant Norton Ridge Pty Ltd – Thirty-Fourth Defendant Raleigh Glen Pty Ltd – Thirty-Fifth Defendant Redcrest Holdings Pty Ltd – Thirty-Sixth Defendant Suri Corporation Pty Ltd – Thirty-Seventh Defendant Sutton Rise Pty Ltd – Thirty-Eighth Defendant The Virtual Mlmer Pty Ltd – Thirty-Ninth Defendant Tivendale Pty Ltd – Fortieth Defendant Tulloch Downes Pty Ltd – Forty-First Defendant Mainking Pty Ltd – Forty-Second Defendant Topglen Pty Ltd – Forty-Third Defendant Allblue Pty Ltd – Forty-Fourth Defendant Aranbay Pty Ltd – Forty-Fifth Defendant |
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16.
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Glenbelle Project
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Sebel Heritage Lodge Management Lot, Yarra Valley Golf Course, Chirnside
Park, Victoria
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Glenbelle Pty Ltd – Twenty-Ninth Defendant
Redcrest Holdings Pty Ltd – Thirty-Sixth Defendant |
“Secured Lender” means any financier who, as at the date of these orders, holds security of any kind over Property of a Scheme or Property of a Corporate Defendant.
ANNEXURE B
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$ (excluding GST)
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Partner
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595
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Director
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520
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Associate Director
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475
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Manager
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420
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Assistant Manger
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320
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Senior Analyst
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280
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Analyst
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210
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Administration
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140
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ANNEXURE C
UNDERTAKING OF MR LETTEN
In this Undertaking:
“Existing Sale Contract” means any contract of sale relating to Property of the Schemes or of the second to forty-fifth defendants that has been executed prior to the date of these Orders in the ordinary course of business and which has not been completed as at the date of these Orders.
“Schemes” has the meaning given in Annexure A to these Orders.
"Property" means all real or personal property, assets or interests in property of any kind, within or outside Australia including, by virtue of section 1323(2A) of the Corporations Act 2001 (Cth) (the Act) any property held otherwise than as sole beneficial owner.
I, MARK RONALD LETTEN, undertake to:
(a) resign as a director of SY21 Retail Pty Ltd (ACN 107 874 564), the Seventeenth Defendant;
(b) deliver up the books and records of SY21 Retail Pty Ltd to Mills Oakley, the solicitors for Mr Bate;
(c) take all steps necessary to facilitate my removal as a signatory to any bank account in the name of SY21 Retail Pty Ltd.
(a) removing from Australia, or causing, procuring, assisting, or permitting to be removed from Australia;
(b) selling, charging, mortgaging, encumbering, securing, diminishing, disposing of, parting with possession, making any declaration of trust in relation to, exercising any power to vary or modify any trust deed or interest under any trust in relation to, removing from their present locations; or
(c) subject to paragraph 1 above, otherwise dealing with or disposing of, or causing or permitting to be sold, charged, mortgaged or otherwise howsoever dealt with or disposed of -
all or any of their respective assets or property, whether such property be held in the name of any of the Second to Forty-fifth defendants or jointly with any other person, company or entity or in the names of nominees or trustees of any of the Second to Forty-fifth defendants; PROVIDED that this Undertaking will not prevent:
(i) me from:
(ii) any bank, building society or financial institution from exercising any right under any security it holds over Property of the Schemes or Property of the defendants, including without limitation any mortgage registered on the title of any real estate registered before the date of this application in the name of any of the Second to Forty-fifth defendants (jointly, severally, or, jointly and severally);
(iii) the completion of the Existing Sale Contracts.
(a) dealing in any way, whether directly or indirectly, with any funds or moneys standing to the credit or under the control of any of the Second to Forty-fifth defendants; and
(b) dealing in any way, whether directly or indirectly, with any property, real or personal, acquired wholly or partially with funds of any of the Second to Forty-fifth defendants.
(a) further promoting or operating any one of the Schemes or any other Managed Investment Scheme that is required to be registered under s 601ED(1)(b) of the Act, but is not so registered;
(b) from doing any act in furtherance of or in connection with any of the Schemes;
(c) from receiving, soliciting or disposing of any funds in connection with the Schemes;
(d) subject to subject to paragraph 1 above, from disposing of, destroying, amending, altering, parting with possession of, removing from their present location, or causing, procuring, assisting or permitting to be disposed of, destroyed, amended, altered, possession parted with or removed from their present location, all and any books, papers, records, books of account, ledgers, journals, banking records, computer records or other documents of any type whatsoever recording or evidencing any dealings of the defendants in relation to any of the Schemes.
ANNEXURE D
UNDERTAKING OF PETER RHYS
BATE
DEFINITIONS
In this Undertaking:
“ASIC” means Australian Securities and Investments Commission.
“Bank Accounts” means any and all accounts with a bank held in the name of SY21.
“Peter Bate” means Peter Rhys Bate of Level 3, 167 Flinders Lane, Melbourne, a director and contributory of SY21.
“Proceeding” means Proceeding No. 95 of 2010 brought by ASIC as plaintiff against the defendants as described in the Schedule attached to the Amended Originating Process given in court to the Honourable Justice Gordon on 23 February 2010, including SY21.
“Property” means the property known registered in the name of SY21 and situate at 720-760 Chapel Street, South Yarra, Victoria more particularly described in volume 10768 folio 918.
“SY21” means SY21 Retail Pty Ltd ACN 107 874 564, the 17th Defendant in the Proceeding.
From the date of this undertaking until 24 May 2010, PETER RHYS BATE, undertakes as follows:
(a) interest payable to Westpac Banking Corporation (“Westpac”) pursuant to the facility between SY21 and Westpac for the purchase and development of the Property;
(b) water rates, council rates, owner’s corporation fees, land tax and any other similar taxes or imposts levied against SY21 in respect of the Property;
(c) insurances payable by SY21 in respect of the Property;
(d) the cost of maintenance and repairs as reasonably required to the Property from time to time; and
(e) any other expenses incurred by SY21 in respect of the Property as approved in writing by ASIC.
(a) selling, charging, mortgaging, encumbering, securing, diminishing, disposing of, parting with possession, making any declaration of trust in relation to, exercising any power to vary or modify any trust deed or interest under any trust in relation to, removing from their present locations; or
(b) otherwise dealing with or disposing of, or causing or permitting to be sold, charged, mortgaged or otherwise howsoever dealt with or disposed of,
the Property or, subject to these undertakings, any other property of SY21, whether or not such property is real or personal, assets or interests in property of any kind, within or outside Australia including, by virtue of section 1323(2A) of the Corporations Act 2001 (Cth) any property held otherwise than as a sole beneficial owner.
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BETWEEN:
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AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION
Plaintiff |
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AND:
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MARK RONALD LETTEN
First Defendant
LGH HOLDINGS LIMITED (ACN 007 191 943)
Second Defendant
211 WELLINGTON ROAD PTY
LTD (ACN 092 663 860)
Third Defendant
BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922)
Fourth Defendant
DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803)
Fifth Defendant
ENOMORE ENTERPRISES PTY LTD (ACN 082 158 487)
Sixth Defendant
FIRBANK ARCH PTY LTD (ACN 059 464 381)
Seventh Defendant
GLENLINE PTY LTD (ACN 098 532 364)
Eighth Defendant
GERLING HOLDINGS PTY LTD (ACN 091 726 457)
Ninth Defendant
LGH ADMINISTRATION PTY LTD (ACN 007 165 069)
Tenth Defendant
LGH FINANCE PTY LTD (ACN 078 859 248)
Eleventh Defendant
LOW HEAD VILLAGE PTY LTD (ACN 091 731 958)
Twelfth Defendant
NICHOLSON STREET PTY LTD (ACN 069 104 089)
Thirteenth Defendant
HOLLOWAY CREST PTY LTD (ACN 091 731 967)
Fourteenth Defendant
ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229)
Fifteenth Defendant
SIMMS INVESTMENTS PTY LTD
(ACN 093 504 511)
Sixteenth Defendant
SY21 RETAIL PTY LTD (ACN 107 874 564)
Seventeenth Defendant
THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543)
Eighteenth Defendant
CASTELLO HOLDINGS PTY LTD (ACN 088 204 175)
Nineteenth Defendant
TWINVIEW NOMINEES PTY LTD (ACN 097 307 278)
Twentieth Defendant
YARRA VALLEY GOLF PTY LTD (ACN 066 632 479)
Twenty-First Defendant
ADINA RISE PTY LTD (ACN 083 181 122)
Twenty-Second Defendant
ALBRIGHT INVESTMENTS PTY LTD
(ACN 088 204 166)
Twenty-Third Defendant
ASHFIELD RISE PTY LTD (ACN 093 504 806)
Twenty-Fourth Defendant
BRADFIELD CORPORATION PTY LTD (ACN 088 204 371)
Twenty-Fifth Defendant
COPELAND ENTERPRISES PTY LTD (ACN 093 504 824)
Twenty-Sixth Defendant
DEVLIN WAY PTY LTD (ACN 088 264 813)
Twenty-Seventh Defendant
FIRST HAZELWOOD PTY LTD (ACN 093 505 303)
Twenty-Eighth Defendant
GLENBELLE PTY LTD (ACN 097 306 646)
Twenty-Ninth Defendant
GLENVALE WAY PTY LTD (ACN 088 287 021)
Thirtieth Defendant
GREENVIEW LANE PTY LTD (ACN 093 505 312)
Thirty-First Defendant
HALLMARK CORPORATION PTY LTD
(ACN 093 505 312)
Thirty-Second Defendant
MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058)
Thirty-Third
Defendant
NORTON RIDGE PTY LTD (ACN 078 821 066)
Thirty-Fourth Defendant
RALEIGH GLEN PTY LTD (ACN 088 204 380)
Thirty-Fifth Defendant
REDCREST HOLDINGS PTY LTD (ACN 100 836 486)
Thirty-Sixth Defendant
SURI CORPORATION PTY LTD
(ACN 093 505 321)
Thirty-Seventh Defendant
SUTTON RISE PTY LTD (ACN 088 204 399)
Thirty-Eighth Defendant
THE VIRTUAL MLMER PTY LTD (ACN 065 374 665)
Thirty-Ninth Defendant
TIVENDALE PTY LTD (ACN 093 505 349)
Fortieth Defendant
TULLOCH DOWNES PTY LTD (ACN 078 895 048)
Forty-First Defendant
MAINKING PTY LTD (ACN 100 790 485)
Forty-Second Defendant
TOPGLEN PTY LTD (ACN 096 857 564)
Forty-Third Defendant
ALLBLUE PTY LTD (ACN 100 836 388)
Forty-Fourth Defendant
ARANBAY PTY LTD (ACN 098 532 319)
Forty-Fifth Defendant
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JUDGE:
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GORDON J
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DATE:
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24 FEBRUARY 2010
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
INTRODUCTION
1 These proceedings concern a number of commercial projects in which Mr Mark Ronald Letten (Mr Letten), the first defendant, has been or is currently involved. In general terms, the Australian Securities and Investments Commission (ASIC) contends Mr Letten (an accountant) promoted 16 joint venture projects to investors which were required to be registered as managed investment schemes pursuant to s 601ED of the of the Corporations Act 2001 (Cth) (the Act) but were not.
2 On 17 February 2010, ASIC filed an originating process against Mr Letten and 44 corporate defendants (the second to 45th defendants inclusive). Mr Letten is a director of each of the second to 45th defendants and, in respect of a number of the corporate defendants, Mr Letten is the sole director. By way of final relief, the originating process sought orders that 16 named “unregistered managed investment schemes” be wound up pursuant to s 601EE(1) of the Act on the grounds that each scheme is and was being operated in contravention of s 610ED(5) of the Act. A list of the schemes, the corporate entities said to be involved in them and the real property connected to each scheme is attached as Schedule 1. By way of final relief, the originating process also sought orders for the winding up of the second to 45th corporate defendants, declarations of contravention of ss 601ED(5) and 911A of the Act by Mr Letten and a permanent injunction against Mr Letten from operating a financial services business.
3 The initial originating process also sought relief on an interlocutory basis. At the hearing of the application for interlocutory relief on 23 February 2010, ASIC filed an amended originating process which identified the amended interlocutory relief sought by ASIC.
4 Before turning to consider that interlocutory relief, it is necessary to identify the parties who appeared and those who were represented. At the hearing on 23 and 24 February 2010, Mr Murdoch QC and Mr Trichardt appeared for ASIC and Mr Sifris SC and Mr Hibble appeared for Mr Letten and the second and tenth defendants. Each of the other corporate defendants filed a submitting appearance stating that they had been served with material showing that ASIC had made application to the Court pursuant to s 601EE of the Act to have receivers and managers appointed to the schemes and the corporate defendants and that they would submit to the decision of the Court. Two of the submitting appearances (SY21 Retail Pty Ltd and Yarra Valley Golf Pty Ltd) did not appear to be signed by the requisite number of directors. A request was made for those submitting appearances to be resubmitted properly executed. After the hearing on 23 February 2010, a solicitor for Mr Peter Bate (Mr Bate), a director and 50% shareholder in SY21 Retail Pty Ltd, informed the Court that he had received no notice of the orders sought by ASIC and opposed the orders sought by it on an interlocutory basis to the extent they concerned SY21 Retail Pty Ltd, the 17th Defendant, which Mr Letten had contended was involved with the SY21 Joint Venture, the scheme listed 12th in Schedule 1 to these reasons for decision. In addition, the submitting appearance for Yarra Valley Golf Pty Ltd which was provided to the Court did not contain the signature of one of the named directors. That entity was said to be one of a number of corporate defendants involved in the Yarra Valley Golf Joint Venture, the scheme listed 15th in Schedule 1. As a result of these (and other matters), ASIC’s interlocutory application was listed for further hearing on 24 February 2010. At that hearing, in addition to those who had appeared on 23 February, Mr Woodward sought and was granted leave to appeal for Mr Bate in relation to SY21 Retail Pty Ltd, the 17th Defendant. I will deal with Yarra Valley Golf Pty Ltd and SY21 Retail Pty Ltd separately later in these reasons for decision.
AGREED ORDERS APPROPRIATE?
5 The interlocutory relief sought by ASIC reflects discussions between legal advisers for Mr Letten and the second and tenth defendants and ASIC’s legal advisers. When the matter came on for hearing on 23 February 2010, I was informed that those legal advisers had substantially agreed the form of orders and, in particular, had agreed:
6 Prior to the hearing of the interlocutory application, an ASIC investigator had filed an affidavit which summarised the reasons for, and history of, its investigations into the management and affairs of the corporate defendants and the activities of Mr Letten. Neither Mr Letten nor any of the corporate defendants filed any material seeking to challenge the contents of that affidavit. Instead, Mr Letten filed a position paper and an outline of submissions in which he acknowledged ASIC’s concerns about the legal structure of some of the projects and agreed that it was in the best interests of all parties (particularly the investors) that a court appointed receiver and manager be appointed to manage the schemes listed in Schedule 1. The consent was for him personally. As noted earlier and subject to the qualifications already noted, the corporate defendants had filed submitting appearances.
7 The ASIC affidavit explained that:
8 Some of the joint venture agreements (see [7(3)] above) were in evidence. One of the agreements was purportedly executed by SY21 Retail Pty Ltd, the 17th Defendant. At the further hearing of ASIC’s application for interlocutory relief, Mr Murdoch QC for ASIC properly noted that although that joint venture agreement was purportedly executed on behalf of SY21 Retail Pty Ltd by a Mr Lane, he was not a director of that company. SY21 Retail Pty Ltd has two directors – Mr Letten and Mr Bate. I will return to deal with SY21 Retail Pty Ltd later in these reasons for decision.
9 For present purposes, it is sufficient to note however that Mr Letten did not challenge ASIC’s assertion that the joint venture agreements were similar for each project. The contents of the agreements before the Court were substantially common. The recitals to the agreements recorded that:
10 The terms of the joint venture agreement provided that the assets of the joint venture would be held by the Manager (the named corporate defendant) on trust for the investors who own the beneficial interest as tenants in common: cl 2.2. Further, the joint venture would continue until termination, inter alia, by agreement by the parties, the sale of the property by the Manager and distribution of all surplus funds of the joint venture or the sale of the assets of the project (defined as interests comprising a share or interest in the investment): cl 2.3. The investors appointed the Manager as their nominee, to manage the joint venture and to hold all of the assets of the joint venture: cll 3 and 4.
LEGISLATIVE FRAMEWORK
11 Section 601ED(5) of the Act provides that “[a] person must not operate in this jurisdiction a managed investment scheme that this section requires to be registered under section 601EB unless the scheme is so registered”.
12 Section 601ED(1) of the Act provides that a managed investment scheme must be registered under s 601EB, relevantly, if:
(a) it has more than 20 members; or
(b) it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes ...
13 In National Australia Bank Ltd v Norman (2009) 74 ACSR 561, Gilmour J (with whom Spender J agreed at [5]) summarised the relevant features of the statutory regime:
[118] The regulation of managed investment schemes is dealt with in Ch 5C of the Act. The history of the law leading to the present statutory regime is set out at length in Australian Securities and Investments Commission v Knightsbridge Managed Funds Ltd [2001] WASC 339 at [38]–[44] (Knightsbridge Managed Funds).
...
[125] All that the word “scheme” requires is that there should be some “programme or plan of action”: Australian Softwood Forests Pty Ltd v A-G (NSW); Ex rel CAC [1981] HCA 49; (1981) 148 CLR 121 at 129 ; [1981] HCA 49; 36 ALR 257 at 262 ; [1981] HCA 49; 6 ACLR 45 at 51 per Mason J, Gibbs CJ and Stephen J concurring.
[126] This has been applied in numerous cases including Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd (1999) 33 ACSR 403; [1999] QSC 387 (Enterprise Solutions 2000); Knightsbridge Managed Funds at [45].
[127] Barrett J in Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 43 ACSR 46; [2002] NSWSC 834 at [15] (Takaran) applied the following gloss:
[15] The essence of a “scheme” is a coherent and defined purpose, in the form of a “programme” or “plan of action”, coupled with a series of steps or course of conduct to effectuate the purpose and pursue the programme or plan. In some cases, the scope of the scheme will readily be gathered from some constitutive document in the nature of a blueprint setting out all relevant matters.
[128] Finkelstein J in Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699 ; 60 ACSR 447 ; [2006] FCA 1415 at [2], citing Takaran at [16] observed that a “scheme ... is the combination of these things necessarily connected by design”, while “[t]he scheme may also include those things or attributes that ‘contribute to the coherence and completeness’ of the three essential elements”. Goldberg J in Australian Securities and Investments Commission v Primelife Corp Ltd (2006) 235 ALR 328 ; 58 ACSR 447 ; [2006] FCA 1072 at [33] described a scheme as “a network of contractual rights and contractual obligations”.
[129] Further, as is explicit in the definition, a “managed investment scheme” contemplates a pooling of contributors’ funds or of a “common enterprise” as between the contributors.
PARTIES’ POSITIONS
14 ASIC contends each of the schemes listed in Schedule 1 was an unregistered managed investment scheme which was required to be registered (a) because of the terms of the joint venture agreements (see [9] and [10] above); (b) each scheme either has more than 20 members or was promoted by a person who was, when the scheme was promoted, in the business of promoting managed investment schemes, namely Mr Letten; (c) was operating; and (d) was required to be registered by the Act but was not registered. Affidavits filed by ASIC set out the number of investors in each scheme listed in Schedule 1 which ASIC has been able to identify to date and, in general terms, the manner in which Mr Letten promoted the schemes. Mr Letten did not and does not challenge ASIC’s description of those matters. Rather, as noted above, his position paper and submissions supported the making of the orders sought by ASIC subject to a limited number of matters which I will address shortly.
APPROPRIATE ORDERS
(1) Schemes listed in Schedule 1 except those numbered 2,
3, 10, 11 and 12
15 Having regard particularly to the fact that the Letten interests agreed and the corporate defendants (other than SY21 Retail Pty Ltd, the 17th Defendant) submitted to any order the Court might make, I consider that, save for the schemes numbered 2 (Healesville Walk Shopping Centre Joint Venture), 3 (Howleys Road Joint Venture), 10 (National Boulevard Joint Venture), 11 (Simms Investment Project) and 12 (SY21 Joint Venture) listed in Schedule 1, it is appropriate in the circumstances that each of the schemes listed in Schedule 1 should be wound up pursuant to s 601EE(1) of the Act. Each of those schemes is an unregistered managed investment scheme and cannot lawfully be continued. Whether it is legally or commercially practical or desirable to take some or all of the assets of any of those schemes and use them in connection with a registered managed investment scheme is not a question I can or should decide on this application. Perhaps they are matters that will be affected by the report of the receivers’ investigations and the views of the investors. For present purposes, what matters is that the schemes are unregistered managed investment schemes. These schemes should be wound up.
16 I also consider that a receiver and manager should be appointed to the property of each of those schemes and the property of the managers of each of the schemes, the corporate defendants. The appointment of a receiver is a drastic remedy. Any appointment of a receiver must be made cautiously and only when it is absolutely necessary: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386. In my view, this is one of those situations. Funds have been contributed by investors in “joint venture projects”. Serious questions have been raised about the management of those projects and the entities associated with them, including the extent to which the funds of one “joint venture” have been loaned or transferred between various accounts and other ventures and schemes. Some investors in some of the schemes have lodged complaints that their funds have not been returned following the sale of the properties the subject of the investments.
17 However, at present I do not consider it appropriate to empower the receivers and managers to realise any property of those schemes or to move to complete any existing sale contracts in relation to any property of those schemes. ASIC’s application was designed to achieve two objectives – preserve the status quo and to provide an independent report into the status of each of the projects. In my view, the orders I propose to make achieve those objectives. If before the time for reporting by the receivers provided for in the orders, the receivers consider additional steps are necessary, then they can make application to the Court in the usual way. By that time, my hope and expectation is that all interested parties will be in a better position to consider any proposal for the future management of the schemes.
18 As noted earlier (see [4]), there were issues concerning the submitting appearance filed by Yarra Valley Golf Pty Ltd, connected with the scheme listed 15th in Schedule 1. The submitting appearance has been signed by a majority (4 of 5) of the named directors. I am informed by Counsel for the Letten interests that the remaining director, Mr Tickell, has recently been diagnosed with a serious illness and is incapacitated. I accept that Yarra Valley Golf Pty Ltd has filed a submitting appearance stating that they had been served with material showing that ASIC had made application to the Court pursuant to s 601EE of the Act to have receivers and managers appointed to the scheme known as the Yarra Valley Golf Joint Venture and to Yarra Valley Golf Pty Ltd and that they would submit to the decision of the Court: see ss 127(1)(a) and Arts 103 and 104 of the Articles of Association of Yarra Valley Golf Pty Ltd. For the same reasons in relation to the other schemes identified in [15]ff, I consider that the same orders should be made in relation to corporate defendants in the scheme listed 15th in Schedule 1 and the Yarra Valley Golf Joint Venture.
CONCLUDED SCHEMES – schemes 2, 3, 10 and 11
19 Despite the general agreement about the form and content of the orders, one area of dispute concerned the appropriate method for dealing with four of the schemes which the Letten interests submitted had concluded. The “Concluded Schemes” were:
20 The Letten interests submitted that the appropriate order was for the corporate defendants associated with these Concluded Schemes to be wound up. On the other hand, ASIC sought an order that the Concluded Schemes be wound up under s 601EE of the Act and for a receiver and manager to be appointed to the property of the scheme and to the property of the corporate defendants associated with those Concluded Schemes.
21 In relation to the first three Concluded Schemes listed in [19] above, the project manager for the LGH Group of companies had informed ASIC during an examination under s 19 of the ASIC Act that she considered these projects were not finalised because payments remained due and owing to investors. For present purposes, that evidence raises at least two difficulties - neither ASIC nor Mr Letten knew whether these schemes had in fact concluded and secondly, s 601EE of the Act does not authorise the winding up of a scheme which was not operating.
22 Section 601EE of the Act gives the Court power, on the application of ASIC, a person operating the scheme or a member of the scheme, to wind up an unregistered managed investment scheme if a person “operates” a managed investment scheme in contravention of s 601ED(5). If the managed investment scheme is no longer “operating”, the Court’s power to order the winding up of a scheme cannot be invoked: see National Australia Bank Ltd v Norman (2009) 74 ACSR 561 at [75] and [4]. (The word “operate” refers to acts constituting the “management of or carrying out of activities which constitute the managed investment scheme”: Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561 at [55] per Davies AJ. See also Australian Securities and Investments Commission v Edwards [2004] QSC 344 at [31] and [34] per McMurdo J; Australian Securities and Investments Commission v McDougall [2006] FCA 427; (2006) 229 ALR 158; Australian Securities and Investments Commission v McNamara (2002) 42 ACSR 488; Australian Securities and Investments Commission v Risqy & Others (No 2) [2008] QSC 139 at [5]- [6]).
23 After discussion and debate, ASIC and Mr Letten accepted that on the basis of the current state of the evidence it was inappropriate to order that these Concluded Schemes be wound up under s 601EE of the Act and that the appropriate order was the appointment of receivers and managers to the assets of each scheme and to the assets of the corporate defendants associated with those concluded schemes. Those orders would preserve the status quo and require the receivers and managers to report to the Court, the investors and other interested parties on the status of the schemes. I will make orders in those terms.
17TH DEFENDANT, SY21 RETAIL PTY LTD AND THE 12th LISTED SCHEME IN SCHEDULE 1
24 As noted earlier, the 17th Defendant, SY21 Retail Pty Ltd, appears to be connected with the 12th named scheme in Schedule 1. On 24 February 2010, Mr Woodward appeared on behalf of Mr Bate, a director and 50% shareholder of SY21 Retail Pty Ltd to oppose the appointment of a receiver and manager to SY21 Retail Pty Ltd.
25 Despite the Court being told on 23 February 2010 by Counsel for Mr Letten that no stakeholder opposed the orders sought by ASIC, Mr Woodward informed the Court that his client was not aware of the proceedings or the proposed orders until he received an email at 11.00 am on 23 February 2010. Further, Mr Woodward informed the Court that although Mr Bate was aware that ASIC was investigating Mr Letten, Mr Bate was not contacted by ASIC or Mr Damian Templeton (Mr Templeton), the investigating accountant (see [30ff] below) in relation to SY21 Retail Pty Ltd. Moreover, until 23 February 2010, Mr Bate apparently was unaware of the existence of any investors (other than he and Mr Letten) in SY21 Retail Pty Ltd and / or the property located at 720-760 Chapel Street, South Yarra.
26 The SY21 Joint Venture (listed 12th in Schedule 1) was the subject of an investigation by Mr Templeton. The circumstances surrounding his appointment I address in the next section of the judgment. For present purposes, it is sufficient to note that this venture has been the subject of investigation by Mr Templeton and the preparation of a report (the Templeton Report). A number of facts disclosed in the Templeton Report are not in dispute including that the property is tenanted by three tenants. Mr Bate is not mentioned in the report.
27 The Templeton Report, however, did disclose that he had identified 38 investors who had participated in the venture by purchasing or taking an interest in the interests held by the 10th defendant, LGH Administration Pty Ltd. As noted earlier, Mr Bate informed the Court he was unaware of the other investors or the existence of the Templeton Report. There are other difficulties. The joint venture agreement placed before the Court in relation to this purported scheme appears on its face to have been executed by a person who was not a director of SY21 Retail Pty Ltd. As Mr Woodward submitted, this may raise questions about what it was that the investors in fact invested in, if they did in fact contribute in the manner described in the Templeton Report. These are all matters of serious concern that require urgent consideration.
28 To permit Mr Bate time to review these materials concerning SY21 Retail Pty Ltd and what is called the SY21 Joint Venture and to obtain the necessary advice, he has offered undertakings to protect the essential capital value of the investment for the benefit of the alleged investors. The undertakings proffered by Mr Bates were conditional on Mr Letten undertaking to take specific steps in relation to bank accounts of SY21 Retail Pty Ltd. Mr Letten refused to provide the undertakings sought by Mr Bates and indicated that if a receiver and manager was not appointed to SY21 Retail Pty Ltd, he would resign this afternoon as a director of SY21 Retail Pty Ltd and would forthwith deliver the necessary books and records to Mr Bate’s solicitors.
29 At the hearing on 24 February 2010, Mr Sifris SC for Mr Letten had submitted that having regard to the matters in the Templeton Report and that the rents from the property at 720-760 Chapel Street, South Yarra are currently being paid to Mr Letten, a receiver and manager should be appointed to the scheme in the same manner as the other schemes. However, Mr Sifris did not submit that a receiver and manager should be appointed to SY21 Retail Pty Ltd. As is apparent, Mr Letten’s position in relation to SY21 Retail Pty Ltd is fluid.
30 After the undertakings were proffered by Mr Bate, ASIC did not seek any additional relief.
31 In the circumstances, I will receive the undertakings proffered by Mr Bate on the basis that Mr Letten has undertaken to resign this afternoon as a director of SY21 Retail Pty Ltd and will take all necessary steps to deliver the books and records of SY21 Retail Pty Ltd to Mr Bate’s solicitors and facilitate his removal as a signatory to the bank accounts of SY21 Retail Pty Ltd. If that does not occur, the matter can be listed for urgent mention pursuant to the liberty to apply. I will otherwise adjourn ASIC’s application for interlocutory relief in relation to SY21 Retail Pty Ltd and the SY21 Project until 9.30am on 4 March 2010. If any party intends to seek to rely on any material at that further hearing, the material should be filed and served by 12 noon the day before the hearing.
IDENTITY OF THE RECEIVER AND MANAGER
32 ASIC and the Letten interests agreed that two persons should be appointed as joint and several receivers and managers. That was not surprising. Given the number and location of the schemes, assets and investors, it is appropriate that two persons be appointed. However, the parties did not agree on who should be appointed.
33 Mr Letten sought that Mr Templeton and Mr Hennessy, both of KPMG, be appointed as the receivers and managers of the property of the corporate defendants and of the property of the schemes. ASIC opposed the appointment of Mr Templeton and instead sought the appointment of Mr Crosbie and Mr Martin of PPB.
34 ASIC did not raise any issue or concern about the probity or competence of Mr Templeton. On the contrary, as the summary of facts will demonstrate, ASIC had selected him as an investigating accountant. Moreover, ASIC accepted that there was no actual conflict of interest that would affect Mr Templeton if he was appointed to act as a receiver and manager. Instead, ASIC expressed concern that a reasonable and informed person may perceive a conflict of interest affecting Mr Templeton because of his previous engagement by Mr Letten.
35 The relevant principles concerning conflicts of interest and independence relating to the appointment and removal of liquidators are established and well known: see, for example, Re the Mutual Stock Financial Agency Company Ltd (1886) 12 VLR 777 at 782; Re National Safety Council of Australia [1990] VR 29 at 32-34. Of course, a liquidator must be and must be seen to be independent and impartial: Re Allebart Pty Ltd (1971) 2 NSWLR 24 at 28-30. That is not surprising given the nature of the duties of the liquidator as described by Marks J in Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 696:
When a winding up occurs, the financial outcome for creditors and contributories is dependent, amongst other things, on honest administration. It is the trust which those persons are obliged to place in the liquidator to preserve the assets and act faithfully and fairly that defines the weight of the duties owed and the strictness with which his conduct must be considered by the Court.
36 These same principles have been held to be equally applicable to voluntary administrators: Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467 at [133]; Commonwealth of Australia v Irving & Anor (1996) 19 ACSR 459 at 462. Further, as Santow J said in Re St George Builders Hardware Pty Ltd (1995) 18 ACSR 451 at 452, a case concerning the appointment of a person as administrator:
In giving leave in applications of this kind, the court should have regard to analogous principles to the removal of a liquidator on the ground of actual or perceived conflict of interest. In Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230, the relevant principles are set out and may be summarised as follows:
(1) The cases show that there must be a real and not merely theoretical possibility of conflict and that the guiding principle in the appointment by the court of a liquidator is that he must be independent and must be seen to be independent.
(2) Those who assert that a liquidator should be removed are under a duty to establish at least a prima facie case that this is for the general advantage of the persons interested in the winding up and the onus of proof will not be easy to discharge if the liquidator has become well acquainted with the business and affairs of the company.
(3) A liquidator may act as a liquidator of a company even if there is a prior involvement with the company in liquidation provided that involvement is not likely to impede or inhibit the liquidator from acting impartially in the interests of all creditors or give rise to a reasonable apprehension that the liquidator might be so inhibited or impeded.
37 In my view, analogous principles should apply equally to the appointment of receivers and managers by the Court. In the present case, the application of those principles to the facts do not preclude Mr Templeton’s appointment but, in my view, favour it.
38 First, the facts surrounding his appointment and subsequent engagement require examination. Mr Templeton was engaged by Mr Letten in December 2009 to act as an investigative accountant. However, Mr Letten did not in fact select him. Mr Templeton was one of three investigating accountants nominated by Mr Letten to ASIC. It was ASIC that selected Mr Templeton. Secondly, the terms of his engagement were shown to and commented on by ASIC. Put another way, ASIC played a critical role not only in his appointment but also in the terms of his engagement.
39 Thirdly, Mr Templeton spent in excess of 500 hours at a cost of some $70,000 familiarising himself with the two schemes on which he reported but also 10 other schemes he considered but in respect of which he did not prepare a report. In that context, it is accepted by both ASIC and the Letten interests that following his engagement, Mr Templeton properly obtained information from Mr Letten about the schemes for inclusion in the Templeton Report. The work he undertook included detailed discussions with Mr Letten to understand the background and current status of each of the relevant schemes, preparing summaries of historical financial statements, understanding the current financing arrangements of the schemes, reviewing valuations for the properties, and preparing lists of investors. Mr Templeton anticipates that it would take a new appointee approximately three weeks to develop the same level of knowledge about the schemes and the circumstances surrounding them. Mr Templeton has become well acquainted with the business and affairs of a number of the corporate defendants and the schemes. To not appoint Mr Templeton would mean that that knowledge would be lost and would need to be repeated at additional cost. At the very least, that would be unfortunate.
40 Fourthly, the report prepared by Mr Templeton for two of the schemes (SY21 and 211 Wellington Road) were submitted to the Letten interests and to ASIC and raised significant issues concerning the management of those schemes and, in particular, the conduct of Mr Letten.
41 Fifthly, as noted earlier, the cost of the work undertaken by Mr Templeton was in the vicinity of $70,000. I was informed by Counsel for the Letten interests that Mr Templeton of KPMG has been paid for this work, albeit by interests associated with Mr Letten.
42 Sixthly, the appointment as receiver and manager is a joint and several appointment by the Court. Such an appointment carries with it two important aspects. Mr Templeton is an officer of the Court, must report to the Court and is subject to the supervision of the Court: s 423 of the Act; Artistic Builders Pty Ltd v Tuthill (Mortgages) Pty Ltd & Anors (2002) 10 BPR 19,565 at [136] and GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250 at [63]- [65]. Secondly and no less importantly, in the unlikely circumstance that events transpire which are of concern to Mr Hennessy, then I would expect Mr Hennessy to apply to the Court, a course he can adopt at any time under the general liberty to apply.
43 Finally, Mr Templeton and Mr Hennessy have informed the Court that they are willing to accept appointment as the receivers and managers of the property of the corporate defendants and of the property of the schemes on the same terms proposed by ASIC, namely without security for their fees.
44 In relation to fees, the draft order submitted by ASIC provided that:
[T]he Receivers shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of their duties and the exercise of their powers as receivers and managers over the Property of each Scheme, to be calculated on the basis of the time reasonably spent by the receivers and managers, their partners and staff in accordance with the Insolvency Practitioners Association scale of fees or such other scale as the Registrar may decide, such fees to be paid out of the assets of the Scheme ...
(Emphasis added.)
45 There is no Insolvency Practitioners Association scale of fees. Such a scale has not existed for about 10 years. Mr Templeton and Mr Hennessy proposed charge out rates specified in a schedule. In my view, the rates proposed by Mr Templeton and Mr Hennessy are appropriate. The Receivers will be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of their duties and the exercise of their powers as receivers and managers. That remuneration and those costs and expenses are to be calculated on the basis of time reasonably spent and will be subject to Court approval. Any assessment by the Court would involve consideration of the complexity of the tasks and the efficient use of appropriate staff in relation to the tasks.
46 For those reasons, I reject ASIC’s submission and will appoint Mr Templeton and Mr Hennessy as joint and several receivers and managers of the property of the schemes listed in Schedule 1 (except that numbered 12) and the property of the corporate defendants (except that of SY21 Retail Pty Ltd). I do not consider that a reasonable and informed person may perceive a conflict of interest affecting Mr Templeton because of his previous engagement by Mr Letten.
47 In my view, the receivers are entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of their duties and the exercise of their powers as receivers of a scheme as may be fixed by the Court on the application of the Receivers, such sum to be calculated on the basis of the time reasonably spent by them and their staff at the rates specified in an Annexure to the Order and such remuneration, costs and expenses should be paid out of the assets of the relevant scheme.
LETTEN LIVING EXPENSES
48 In December 2009, Mr Letten had provided undertakings to ASIC which were due to expire on 28 February 2010. Those undertakings, in part, restrained Mr Letten from disposing or otherwise dealing with his assets but permitted Mr Letten to access $5,000 per week for living expenses. The parties have agreed that a form of the undertakings will now be given by Mr Letten to the Court. However, ASIC submits that an allowance of $5,000 per week for living expenses is excessive and should be reduced to $2,500.00 per week.
49 Mr Adrian Muller, a solicitor for Mr Letten, filed an affidavit setting out in general terms Mr Letten’s contention that his living expenses were $3,757.00 per week or some $195,367.00 per annum. Counsel for Mr Letten contended that having regard to Mr Letten’s degree of cooperation and that there was no assertion of defalcation, Mr Letten should be permitted living expenses of $4,000.00 per week. I accept ASIC’s submission that the affidavit material filed on behalf of Mr Letten is less than satisfactory. It is not an affidavit from Mr Letten, but his solicitor. It contains no supporting documentation. At best, it is assertion. The figures quoted for particular expenses are not explained and include such items as “miscellaneous contingencies”. Further, although the affidavit suggests that Mr Letten’s family are dependent on these living expenses, the affidavit does not disclose the financial position of Mr Letten’s wife.
50 In the circumstances, Mr Letten should be permitted living expenses of $2,500.00 per week. This amount does not include his legal expenses. If it transpires that the amount fixed is insufficient, Mr Letten can apply to the Court in the usual way on proper material.
Dated: 25 February 2010
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Scheme
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Description of property
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Joint venture manager/s
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211 Wellington Road Joint Venture
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211 Wellington Road, Mulgrave, Victoria
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211 Wellington Road Pty Ltd – Third Defendant
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Healesville Walk Shopping Centre Joint Venture
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251-263 Maroondah Highway, Healesville, Victoria
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Bluemist Holdings Pty Ltd – Fourth Defendant
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Howleys Road Joint Venture
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40-48 Howleys Road, Notting Hill, Victoria
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Dellwood Holdings Pty Ltd – Fifth Defendant
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George Street Joint Venture
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34 George Street, Launceston, Tasmania
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Enmore Enterprises Pty Ltd – Sixth Defendant
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Cimitiere House Joint Venture
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113 Cimitiere Street, Launceston, Tasmania
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Enmore Enterprises Pty Ltd – Sixth Defendant
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Reef House Resort
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99 Williams Esplanade Palm Cove, Qld – The Sebel Reef House
Resort
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Firbank Arch Pty Ltd – Seventh Defendant
Glenline Pty Ltd – Eighth Defendants |
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Queen Street Joint Venture
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118 Queen Street, Melbourne, Victoria
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Gerling Holdings Pty Ltd – Ninth Defendant
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Low Head Joint Venture
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136 Low Head Road George Town, Tasmania, 142 Low Head Road, George Town,
Tasmania & 40 Gunn Parade, George Town, Tasmania
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Low Head Village Pty Ltd – Twelfth Defendant
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Nicholson Street Joint Venture
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127-137 Nicholson Street, East Brunswick, Victoria
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Nicholson Street Pty Ltd – Thirteenth Defendant
Holloway Crest Pty Ltd – Fourteenth Defendant Rosebery Enterprises Pty Ltd – Fifteenth Defendant |
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National Boulevard Joint Venture
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144 National Boulevard, Campbellfield, Victoria
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Rosebery Enterprises Pty Ltd – Fifteenth Defendant
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Simms Investment Project
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626 Pittwater Road, Brookvale, NSW
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Simms Investments Pty Ltd – Sixteenth Defendant
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SY21 Joint Venture
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720-760 Chapel Street, South Yarra, Victoria
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SY21 Retail Pty Ltd – Seventeenth Defendant
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The Glen Centre Joint Venture
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673–681 Glenferrie Road, Hawthorn, Victoria
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The Glen Centre Hawthorn Pty Ltd – Eighteenth Defendant Castello
Holdings Pty Ltd – Nineteenth Defendant
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Twinview Joint Venture
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167 Flinders Lane, Melbourne, Victoria
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Twinview Nominees – Twentieth Defendant
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Yarra Valley Golf Joint Venture
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St John of God's Seminary and Henley Farm, Chirnside Park, Victoria
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Yarra Valley Golf Pty Ltd – Twenty-First Defendant
Adina Rise Pty Ltd – Twenty-Second Defendant Albright Investments Pty Ltd – Twenty-Third Defendant Ashfield Rise Pty Ltd – Twenty-Fourth Defendant Bradfield Corporation Pty Ltd – Twenty-Fifth Defendant Copeland Enterprises Pty Ltd – Twenty-Sixth Defendant Devlin Way Pty Ltd – Twenty-Seventh Defendant First Hazelwood Pty Ltd – Twenty-Eighth Defendant Glenbelle Pty Ltd – Twenty-Ninth Defendant Glenvale Way Pty Ltd – Thirtieth Defendant Greenview Lane Pty Ltd – Thirty-First Defendant Hallmark Corporation Pty Ltd – Thirty-Second Defendant Moorleigh Holdings Pty Ltd – Thirty-Third Defendant Norton Ridge Pty Ltd – Thirty-Fourth Defendant Raleigh Glen Pty Ltd – Thirty-Fifth Defendant Redcrest Holdings Pty Ltd – Thirty-Sixth Defendant Suri Corporation Pty Ltd – Thirty-Seventh Defendant Sutton Rise Pty Ltd – Thirty-Eighth Defendant The Virtual Mlmer Pty Ltd – Thirty-Ninth Defendant Tivendale Pty Ltd – Fortieth Defendant Tulloch Downes Pty Ltd – Forty-First Defendant Mainking Pty Ltd – Forty-Second Defendant Topglen Pty Ltd – Forty-Third Defendant Allblue Pty Ltd – Forty-Fourth Defendant Aranbay Pty Ltd – Forty-Fifth Defendant |
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Glenbelle Project
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Sebel Heritage Lodge Management Lot, Yarra Valley Golf Course, Chirnside
Park, Victoria
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Glenbelle Pty Ltd – Twenty-Ninth Defendant
Redcrest Holdings Pty Ltd – Thirty-Sixth Defendant |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2010/140.html